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Leadership Advice

Starting a Gym Franchise? Here are 5 Ingredients to Success

Last Updated on December 8, 2016

Eric Goldschein is a freelance journalist who covers entrepreneurship, small business trends, emerging technologies, culture and sports. He was previously the managing editor of SportsGrid.com, and has written for Business Insider, Trep Life, the Huffington Post and more.

You can contact him at ericgoldschein.com, or on Twitter at @ericgoldschein.

Millions of Americans agree: Getting in shape is easier when you have a gym membership. The fact that most gym franchises have the tools for a variety of workouts—from machines to classes to free-weights—that most people can’t keep at home is one thing. The financial incentive to not let your monthly or yearly fee go to waste is also strong.

If you’re an entrepreneur and interested in fitness, you’ve likely noticed an uptick in the number of gym franchise locations over the years. While the allure of owning your own independent health club might be strong, there are some unique advantages to joining forces with an established company instead.

Here are 5 things to consider when weighing the decision to start a gym franchise:

1. Substantial startup costs

If you’re an individual or part of a group that wants to capitalize on the success of a noted gym brand and bring it to a new and needed location, you’ll have to pay various startup costs and probably some residual fees to the corporate office.

Some brands are less expensive than others. Ditto for some locations. For example, Snap Fitness’ initial investment ranges from $77,000 to $250,000, including all needed working capital, while Curves charges $24,000 plus a few thousand extra for equipment delivery.

Some companies have larger financial requirements: Planet Fitness, for example, asks that franchisees have liquid assets totaling at least $1.5 million, with an overall net worth over $3 million.

Royalties are another cost: Some companies charge a flat rate per month (usually around $400 to $500—again, depending on the brand) while others take a percentage of gross revenue. Royalties pay for continued use of the brand name—a huge draw for potential customers—and help with marketing, advertising, training of new employees, and other support that independent gyms have to fund on their own.

2. Location, location, location

An easily accessible and convenient location for your gym is crucial. For most gym-goers, closer to home or work is always better, and many will pay between $10 and $50 more a month for a more convenient option. As to figuring out what constitutes “convenient” for your target membership, it all starts with studying the data available to you.

“The first thing to do is look at the demographics of the area,” says Montoya Jennings, operations manager for L.A. Fitness in Atlanta, Georgia. “Choosing a location depends on a lot of things: the average age of the area, the crime, and if it’s near a shopping center, which encourages more foot traffic and spending. There’s quite a bit of data to consider.”

You can utilize resources like Stats America to research everything about residents in a given region, from gender breakdown to estimated median income, which tells you whether the kind of gym you want to open will have a stable community of potential members to draw from.

Another part of the location decision is whether to use an existing structure to house the gym or to build something new entirely. In the case of L.A. Fitness, they’ll often look for a satisfactory property in a desired location, then enlist a contractor to build according to the company’s description and specifications. That’s just the first step in making the location fit to open, however.

“You need to get the license to occupy, the business license for that facility, the fire inspectors to come out and do their inspection, contractors to ensure the fire sprinklers and plumbing are up to code. Then L.A. Fitness sends out its own team to install all the equipment for the facility—that team decides what goes and what doesn’t,” says Jennings.

There are fees for obtaining building permits, and other permits might be necessary as well, depending on the kind of amenities the gym plans to offer. For example, a snack bar could require employees to pass a food handling test specific to that locality.

3. Seasonal gym-goers

As you might expect, you’ll see an uptick in new memberships around the beginning of the year” getting in shape is a popular New Year’s resolution. That wave often dies out come March, but Jennings notes that there’s another wave “as beach season approaches.”

Since gym memberships tend to ebb and flow throughout the year, some might be tempted to capitalize on the prospective members that do come in during the slow months. Jennings warns against that model.

“Don’t make your salespeople oversell the big packages to people who don’t need it,” he says. “If they’re first timers, they may not want to be jumping from club to club, location to location. You want people feeling comfortable coming to a gym, rather than making them overwhelmed with options and prices. Give them bang for their buck, they’ll be happiest that way, and you give a good first impression.”

While the fitness business has highs and lows, there’s also a consistency of income that most businesses lack. Though much of starting a gym franchise involves investment, capital requirements are often stable afterward, and unlike other retail businesses, an expanding membership doesn’t often require the gym to perform massive upgrades to maintain service. For example, health clubs are paid handsomely at the beginning of each month thanks to relatively stable automatic bank transfers from members. Retail stores, meanwhile, start back at zero and need to work their way up each month.

And though sales might vary month-to-month, IHRSA data indicates that gyms are fairly recession-proof—the industry continues to grow despite plenty of economic downturns over the past few decades.

4. The role of corporate

Franchise headquarters most likely have guidelines for finding and training staff members, and will often coordinate to transfer individuals between nearby locations if there’s a staffing gap. But gyms can often take finding new employees upon themselves as well, according to Jennings.

“As operations manager, it’s my job to be aware of local job fairs or other marketing opportunities to assemble a team and make sure LA. Fitness is represented,” he says. “I’m always in touch with corporate, but we’re the ones who execute that plan.”

Every position at a gym is important and it’s crucial to build a culture of supportive, friendly employees—but pay particular attention when hiring a sales team and janitorial staff. Both play big roles in continued business for your location in particular.

“We saw a surge in membership after I arrived at my location because I emphasized cleanliness and gym etiquette,” says Jennings. “It’s important to be up to speed on supplies: we were behind the game instead of ahead, and were often lacking for paper towels and cleaning solution.

“But we also emphasized to members that they were a part of keeping the gym looking good,” he adds. “We let members know they can and should bring a towel of their own. We also talked to them about wiping machines down and putting weights back in their proper place. We started getting more walk-in members as soon as we started cleaning up.”

Sales are also a big part of maintaining a solid membership, as they’re on the front lines of convincing people that your gym franchise—and perhaps your location in particular—is the best fit for them. The more passionate, friendly, and personable your sales team, the better.

“You’re selling more than the gym,” says Janelle Gibson, assistant sales manager at L.A. Fitness. “When I first came here, I had to go out into the streets and find people that might want free passes. Part of your marketing has to be yourself and your environment rather than the ‘sweating and enduring pain to lose weight’ angle. Lots of gyms have that aspect, but you’ve got to put your face to it so when they’re ready to come in, they keep coming.”

5. The customer is king

While people want their gyms to have certain equipment on-hand, and maybe classes that fit their schedule, everything comes back to being treated well as a member. A gym with good customer service builds on its own success, and won’t have to waste time and resources canceling memberships or scrambling to find new ones.

“Your goal is to build member referrals,” says Gibson. “The best way to get new customers is the make the members already here want to come back, and if you make it a fun place, they want to bring people that they know with them. That’s how you keep it going long-term.”

Member referrals are so important that they’re considered “word-of-mouth” marketing. 64% of marketing executives say word-of-mouth is the most effective marketing method, and it’s probably most effective with the 18-29-year-old demographic—a historically prized demographic for gym franchises. (Though all ages and income brackets are now targets as the nation becomes more health-conscious.)

“Genuinely let people know that you care about even the smallest details in their gym,” says Gibson. “Attention to detail and confronting the small things—lack of access to weights is a common one—is how you get that positive feedback and the referrals. You have to let them know that they’re heard as members. The members that have been here the longest—they’re the ones that go on Yelp, that go on social media, that tell their friends. It’s very easy for someone to get on social media to complain, but it’s harder to get them to go on and deliver praise.”

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Starting a franchise gym isn’t for the weak-willed or those without the upfront capital. If you have the means to go into business with a brand-name gym, however, you have the opportunity to enter an industry that expects to see continued growth for years to come with the backing and support of an established name. With an independent gym, you have to start from the bottom. The headstart that a franchise gives entrepreneurs is substantial—from then on, it will be up to you to fulfill that promise of success.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Eric Goldschein is a freelance journalist who covers entrepreneurship, small business trends, emerging technologies, culture and sports. He was previously the managing editor of SportsGrid.com, and has written for Business Insider, Trep Life, the Huffington Post and more.

You can contact him at ericgoldschein.com, or on Twitter at @ericgoldschein.